MercoPress. South Atlantic News Agency

Bank of America takes over Merrill Lynch for 50 billion USD

Bank of America is to buy Merrill Lynch in a deal worth 50 billion US dollars that will create a new financial giant. The deal came amid a hectic weekend on Wall Street, with Lehman Brothers announcing that it would file for bankruptcy protection.

There were worries that Merrill would be the next bank to lose the confidence of investors as it has been hit hard by bad mortgage debt. Merrill has written down more than 40 billion US dollars of assets in the past year. Under the terms of the deal, Bank of America will pay about 29 US dollars for each Merrill share. While that represents a 70% premium to the closing share price on Friday, Merrill's share price stood at 50 US dollars in May and was above 90 at the start of 2007. "Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders" said on Monday Bank of America chairman and chief executive Ken Lewis in a statement. "Together, our companies are more valuable because of the synergies in our businesses" he underlined. The deal will also see three Merrill Lynch directors join the board of Bank of America. "Merrill Lynch is a great global franchise and I look forward to working with Ken Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms" said John Thain, Merrill's chairman and chief executive. The deal, which is expected to be completed in the first quarter of 2009 has been approved by directors of both companies, but now will need the approval of shareholders and regulators. Merrill's share price had fallen last week as Lehman Brothers undertook its ultimately unsuccessful search for a buyer. The acquisition holds the promise of establishing Bank of America as a universal banking powerhouse. If the deal goes through, according to Bank of America, it would also make the company the biggest underwriter of global high yield debt, the world's third-biggest stock underwriter, and the ninth biggest adviser on mergers and acquisition. Merrill Lynch & Co. Inc. has 60,000 employees, offices in 40 countries and total client assets of 1.6 trillion US dollars. Its activities are organized under two interrelated business segments: Global Markets & Investment Banking and Global Wealth Management, which consists of Global Private Client and Global Investment Management.